Written Evidence submitted by the Child Poverty Action Group (BSW0009)

About CPAG

Child Poverty Action Group works on behalf of the more than one in four children in the UK growing up in poverty. It doesn’t have to be like this. We work to understand what causes poverty, the impact it has on children’s lives, and how it can be prevented and solved – for good. We provide training, advice and information to make sure hard-up families get the financial support they need. We also carry out high profile legal work to establish and protect families’ rights.

CPAG’s Early Warning System helps us get a better understanding of how changes to the social security system are affecting the lives of children and families. We gather information from advisers about the experience of children and families. This intelligence informs much of our policy, research and campaigning work, and also feeds into the advice we give frontline advisers. Case studies from the Early Warning System are featured throughout this submission.

In Wales, Child Poverty Action Group delivers the UK Cost of the School Day project in partnership with Children North East. We work directly with children, their families and school communities, undertaking action research to address poverty-related barriers to participation in education.

Executive summary

Key challenges for the benefit system in Wales:

Actions the UK government must take to improve the benefit system and tackle poverty in Wales:

Actions the Welsh government must take to support the benefit system and tackle poverty in Wales:

Actions the Welsh government and UK government must take to together to tackle poverty in Wales:

What are the key challenges for the benefits system in Wales and how do they differ from the other nations and regions of the UK?

The benefit system is one of the ways that we as a society protect children in poverty. However, the number of children in poverty has been rising in Wales, driven by changes to social security that have particularly affected families with children. Pre-pandemic, 190,000 children in Wales were in poverty after housing costs (31 per cent).[1]

The benefit system can prevent and alleviate poverty by providing support during periods of unemployment and sickness. Due to the higher proportion of people unable to work for health-related reasons, inadequate benefit support for people out of work will be felt more acutely in Wales than in many other parts of the UK.

The benefits system also plays a role in topping up the incomes of working people, primarily through UC, although a significant proportion of Welsh households still claim legacy benefits like employment support allowance and working tax credit. As pay levels in Wales are below the UK average[2] and a higher proportion of employees in Wales are in temporary work,[3] the way that the benefits system supports lower income workers is particularly important in Wales. With 70 per cent of children in poverty in Wales in families where someone is in work,[4] improving the way that the benefit system supports working parents is also crucial in order to reduce child poverty.

The benefits system works in tandem with other supports and services to alleviate poverty by reducing living costs or supporting people to enter or progress in work. Shortfalls in these additional support systems, some of which are administered by the Welsh Government, make the inadequacies of the benefit system more acute for families in and out of work.

Affordable childcare, for example, reduces living costs and supports parents into employment. The provision of funded childcare is less widely available in Wales than in England, with the provision for 2 year olds confined to areas of high deprivation. The Coram Family and Childcare 2021 survey found that only half of local authorities in Wales have enough childcare for free early education entitlements, and found significant shortages in provision for disabled children and for parents working atypical hours.

Free school meal provision also reduces the living costs of eligible families, and can save families over £700 a year per eligible child. However, over 70,000 of the 129,000 school-age children in poverty in Wales are not eligible for free school meals, mainly because their parents are in low-paid jobs, which take them over the eligibility threshold.[5] Unlike in England and Scotland, Wales does not provide universal infant free school meals. These two policies in combination cause a significantly higher proportion of children in poverty to miss out on free school meals compared to elsewhere in Britain. It also means more than half of children in poverty in Wales cannot receive Pupil Development Grant Access (PDG-A) payments, which help with the cost of school uniforms, ICT equipment, learning resources and sports kit.

Pre-pandemic, how effectively did the UK benefits system tackle poverty and socio-economic inequalities in Wales as compared to England and Scotland?

The benefit system plays a vital role in tackling poverty and socio-economic inequality, and our research shows that function has popular support in Wales. In January 2021, CPAG held an online citizens jury with a representative sample of 24 participants living in Port Talbot. The jury explored opinions on what the social security system should achieve. Jurors felt strongly that the central aim of the social security system should be to eliminate poverty, homelessness, hunger and destitution, and to protect against financial hardship and struggle.

“People should get the help they need, when they need it so nobody has to struggle.”

“It’s a human right to be safe, warm and fed. How can we tell people that they are not worth that?”

Changes to the benefit system over the past decade have undermined its ability to achieve the aims supported by the Welsh jurors. UK Government policy since 2010 led to £36 billion being cut from social security every year in the lead up to the pandemic.[6] Households with two or more children have experienced much larger losses as a result of the tax and welfare reforms than households without children.[7] This has contributed to rising levels of child poverty in Wales.

Cuts and freezes to the value of social security benefits mean they do not provide enough for many families to live on, even if they are topped up by wages from paid work. Analysis commissioned by the EHRC found that changes to social security would leave around 48% of adults and 62% of children in Wales living on incomes below the minimum income standard judged necessary for a dignified standard of living.[8] 

Cuts to benefits, including the two child limit, the overall benefit cap and reductions in housing support, have disproportionately affected certain groups in the Welsh population, particularly families with children. According to the latest available statistics at the time of writing:

Low-income families in Wales are affected by both the value of support available through the benefit system, and also by the manner in which it is provided. The introduction and administration of UC has created new challenges for the 175,000 claimants in Wales who are in employment.[13] UC’s rigid system of monthly income assessments makes it difficult for the 40 per cent of working claimants who aren’t paid monthly to anticipate their UC award. Meanwhile the ‘minimum income floor’ and ‘surplus earnings rule’ penalise the self-employed and those with fluctuating earnings. This is particularly important in Wales where many jobs are seasonal and pay levels are below the national average.[14]

Cases from CPAG’s Early Warning System highlight how the administration of UC is affecting working claimants in Wales:

A man in a couple is paid on the last day of the month. In June, November and January he received two months’ worth of earnings in the same UC assessment period, as the last day of the month fell on a weekend. Each time it happened the couples UC payment was significantly reduced. The issue is causing significant financial hardship.

A woman works variable shifts as a nurse. UC’s built-in real-time information feed does not correctly capture her earnings information and she needs to submit them manually each month and sometimes submits them too late for an assessment period. She is very stressed by COVID and has been off work due to cancer recovery.

How has the COVID-19 pandemic changed the type and amount of support needed by people in Wales?

Research has shown that, across the UK, lower income families, particularly those with children, saw the biggest increase in their costs of living during the pandemic. It became harder to access free services and discount shops, and home life become more expensive with greater demands on food and energy. Families with children also needed to buy resources for home schooling.[15]

Since the start of the pandemic the number of families with children claiming UC in Wales has risen by over 50 per cent.[16] Some of these households will have already been claiming means-tested legacy benefits and migrated over to UC due to a change of circumstances, while others will have been new claims necessitated by financial hardship as a result of the pandemic.

One indication of deepening financial hardship among families with children in Wales is the significant increase in the number of children eligible for means-tested free school meals. In April 2021, of the 378,262 pupils aged 5 to 15 in Wales, 23.3% were known to be eligible for free school meals.[17] This is up from 19.9% in January 2020, and equates to around 13,000 additional children receiving FSM due to their family’s constrained financial circumstances.[18] Because Wales has a very low earnings threshold for FSM eligibility (a maximum earned income of (£7,400 per household), the sharp increase in eligible pupils suggests that many more children are living in very low-income households than before the pandemic.

In CPAG’s Cost of Learning in Lockdown surveys, families in Wales reported higher living costs when their children were unable to attend school. Analysis of our data showed that low-income parents in Wales were more likely to have bought learning materials like stationery, arts and crafts materials and printing resources during lockdown, compared to those in better-off homes. Our qualitative research suggests that this is because low-income families were less likely to own these resources prior to lockdown, often relying on schools to help offset the cost of providing learning resources.

“[I have been buying] paper, glue, making stuff. It's just all extra expensive, I can't keep paying for [it].” (Single parent with one child, Neath Port Talbot)

Many families also told us they faced higher-than-normal costs after their children returned to school following the first national lockdown.

“I bought 5 of everything for both kids so they could fully strip on return from school every day. This therefore cost 4 times more than normal. Plus second-hand uniform was unavailable this autumn term.” (Mother of two children, Cardiff)

“I had to buy more sets of uniform due to school asking for clean uniform to be worn every day. After school clubs asked for children to be sent home to change for afterschool sport due to no changing rooms - this incurred extra petrol costs.” (Mother of two children, Wrexham)

The issue of family incomes being insufficient to help cover the cost of raising children was also echoed in our Port Talbot citizens jury. Participants reported that the levels of support through the benefit system were inadequate for families with children.

“It’s not enough, the money you get to help with the kids isn’t enough and it’s hard to find ways to pay for what you need to get a job to better the situation.”

How effectively has the UK benefits system responded to these needs, and what else should the UK Government do to deliver the right support in Wales?

Some of the steps taken by the UK government reduced the extent of financial hardship that the lockdowns could have caused. In particular, those who could have become unemployed but were instead furloughed were able to sustain a monthly income of up to £2,500 and retain a connection to the labour market, rather than the £400 that would have been available through the UC standard allowance. The proportion of the Welsh workforce placed on the furlough scheme was similar to the UK average.[19]

The government also made a series of changes to the existing benefit system including an increase to the standard allowance in UC and basic rate in working tax credit, alongside additional help for private renters. Neither the furlough scheme nor increases to benefit values recognised or adequately addressed the additional living costs faced by lower income families with children, as they did not correspond to household size.

Many low income families in Wales fell between the gaps of these pandemic response measures, for example, those not eligible to claim benefits, those affected by the benefit cap and recipients of legacy benefits. In February 2021, 44 per cent of claimant households in Wales were receiving legacy benefits and did not benefit from the UC increased, higher than the average for Great Britain as a whole (39 per cent).[20]

The increase to UC was needed because the value of working-age benefits had fallen significantly in the years leading up to the pandemic, to a level substantially below what is needed to meet basic needs. The UK government should abandon plans to cut UC in October 2021, because the cut would reduce the incomes of over 280,000 UC recipients in Wales by over £1,000 a year, and cut the level of unemployment benefit to its lowest in real terms since 1990/91.[21]

In addition, the UK government should abolish the two child limit and the benefit cap, and it should reinvest child benefit to reflect the rising living costs faced by low-income families with children. These changes would be the most effective way to target money towards children in poverty in Wales.

How effectively do the Welsh Government’s allowances and grants meet the particular needs of people in Wales?

Welsh Government grants and allowances have played a significant role in protecting families with children from hardship and destitution during the pandemic. In particular, the decision to provide cash payments in lieu of free school meals, and the increased funding and flexibilities in the DAF have both ensured that thousands of families have had enough money to avoid hardship throughout the pandemic.

A particular strength of the Welsh Government’s pandemic response was the decision to allow local authorities to provide direct payments in lieu of free school meals to households whose children were eligible for FSM. Coupled with efficient administration by Wales’ local authorities, tens of thousands of families were able to afford to buy the food they needed in a flexible and dignified way that met their individual needs.

We get cash payments into the bank account. It’s about £58 a week for the three of them. Honestly, it’s absolutely fantastic […]. It’s helped us out massively. […] Cash is way better than any other options like random food being delivered or vouchers or anything like that – it gives us complete autonomy and freedom of choice on how best that money is spent to suit our family. I’ve got a meat eater, a pescatarian and a vegetarian to cater for – if we were sent specific foods, that wouldn’t work well for everyone’s dietary requirements.” (Mother with 3 children, north Wales)

The majority of FSM-eligible Welsh families we surveyed in our Cost of Learning in Lockdown studies reported that they were receiving direct bank transfers to enable them to replace their children’s free school meals[22]. Parents and carers in Wales were very positive about this method of providing support, with 93% saying it was working well for their family. In particular, families valued having dignity and choice when purchasing their food, as they were able to shop in a wider variety of retailers and choose food they knew their children would enjoy eating. Cash allowed some families to add the allowance into the overall food shop, ensuring better value for money because they could shop and cook for the whole household.

“I’m not limited to just certain stores. I can buy what my children like and need when out shopping.”  (Mother of two children, Merthyr Tydfil)

“Money in the bank is much easier as I have 2 autistic children with restrictive diets. Collecting a packed lunch wouldn't work as they wouldn't eat the things provided. The money means I can get the foods they will eat from whichever shop sells it.” (Single mother of three children, Neath Port Talbot)

“As we always eat as a family, and due to my husband and I being disabled, it is easier to just use [the money] while doing our online shop” (Mother of 3 children, Rhondda Cynon Taf)

“I like the empowerment and personal choice of what to buy and how to gain best value” (Mother of 3 children, Denbighshire)

I prefer the cash payment as it allows me just to do a bigger food shop and I have more choice of shops so can get cheaper food. I can also get food I know my children will eat and have all allergies information - something we didn't get when Wrexham was doing the pack lunches” (Mother of two children, Wrexham)

Families who received hampers and food parcel deliveries were grateful to be getting help with the additional cost of children being at home, but most would preferred cash transfer or supermarket vouchers if they had been given a choice. Only 4% of families said they would prefer to have food parcels delivered.

Wales started the pandemic better equipped to provide emergency cash payments to struggling households thanks to the existence of a coherent national welfare assistance scheme. This made it easier for individuals to quickly access cash support if they were facing destitution as a result of Covid-19.[23] In 2018/19, Wales invested £3.37 per person in local welfare assistance schemes, compared to 73p per person in England. However, this was still significantly less than the £6.49 per person in Scotland and £7.31 per person in Northern Ireland.[24]

Nonetheless, by increasing the budget of the Discretionary Assistance Fund, allowing more frequent payments, and introducing new flexibilities into the qualifying criteria, the Welsh Government ensured more households in Wales were able to get financial assistance when they found themselves without income during the pandemic. In particular, the flexibility allowing families to make a claim because they faced extra costs as a result of their children being unable to attend school provided an additional safety net for low-income households struggling with the additional costs created by school closures.

Since March 2020, almost 220,000 Covid-related Emergency Assistance Payments have been made, paying out almost £15million to households in need. Welsh Government data shows that the vast majority of people accessing EAPs between March 2020 and July 2021 did so for reasons related to the pandemic.[25] On average, people received an award of £67, allowing them to buy basic resources and prevent them from falling into deeper destitution. However, data also shows that the majority of people accessing DAF payments had received help from the scheme in the past, suggesting that people facing hardship for the first time may not be aware of this source of support.

In addition, many claims for EAPs are turned down. In 2018/19, 45% of claims for an EAP were rejected by decision-makers. In 2020/21, the Welsh Government reported that 201,000 payments were awarded, while about 110,000 applications were rejected. Around 15,000 of these rejections were because people had already made five claims to the DAF in a 12 month period. The Welsh Government does not publish data on why the other applications were turned down, although participants in a recent CPAG roundtable for our Ending the Need for Foodbanks project[26] suggested that some people are not aware of the rules and what eligibility criteria must be met for specific types of grant. Another roundtable participant noted the low acceptance rate of the DAF meant some support providers found it easier to issue a foodbank voucher to someone in need, because it offered a more guaranteed form of support.

Evidence from our surveys with families in Wales shows many are unaware of the DAF, and some were enduring financial hardship that could potentially have been alleviated by a cash award, if the person had been aware this support existed. Some schools and local authorities helped to signpost families to sources of financial support, but many families in need told us that they hadn’t received any information about the DAF, or other ways to maximise their incomes. Of those who tried to find information to help themselves, more than half said they found it difficult to find the information they needed.

The removal of the main lockdown-related DAF flexibilities at the end of June 2021 has led to a sharp fall in the number of COVID-19 EAPs, although the impact is somewhat offset by a rise in the number of payments awarded under normal EAP criteria.

While the Welsh Government have committed to the ongoing provision of EAPs for some Covid-related reasons, we are concerned that families with children may face particular hardship this autumn, as UC is cut by £20 a week, furlough ends and children may still need to be out of school due to coronavirus outbreaks in their settings. The Welsh Government should continue to invest in the DAF to meet any additional demand arising from the economic and educational disruption caused by the pandemic. It should also continue to promote and raise awareness of the DAF, so people who are new to poverty are aware that they can receive cash support if they find themselves facing financial crisis.

What reforms are needed to the benefits system and should there be further devolution of powers?

Responsibility for tackling poverty and socio-economic inequalities does not lie solely with the benefit system or with a single level of government. A nationwide strategy is needed to make sustained progress in reducing child poverty in Wales and across the UK. It should set a target to eliminate child poverty and identify steps that the UK government and developed administrations will take in the areas of social security, employment, child care, health, education and housing to achieve this.

Reforms are needed to make the benefit system effective at preventing and reducing poverty, providing income security, and promoting social solidarity. The most urgent issue is the adequacy of means-tested benefits. Abandoning plans to cut UC, abolishing the two child limit and the benefit cap, and reinvesting in child benefit will benefit thousands of low income families in Wales. However, these changes are needed to support families across the UK, and the power to make them lies with the UK government.

With more than 70 per cent of children in poverty in Wales living in a working family,[27] the way the benefit system supports people in work is also in need of reform. The UK government should make the following changes to UC to help reduce in-work poverty in Wales:[28]

While it is commendable that Wales has a national, integrated emergency welfare assistance scheme, in the future the DAF could be strengthened by moving to a more rights-based system. In an optimal social security system, CPAG believe benefits should be rights-based: claimant entitlements should be based on the law, with a clear right to appeal and with a limit on discretionary decision making. This includes ensuring the system is transparent and accountable, and upholds the UK’s obligations under human rights law, including the UN Convention on the Rights of the Child. Scotland provides an example of a government that has recognised social security as a human right and enshrined this in law through the Social Security (Scotland) Act 2018.

The benefit system does not operate in isolation, and participants in our Port Talbot citizen’s jury felt strongly that the benefit system needed to be supported by wider policies such as affordable housing and utilities, and the provision of lifelong learning. Jurors recognised that the provision of cash-transfers alone would not necessarily promote social solidarity or allow all citizens to enjoy the best quality of life.

“Social security absolutely can’t be fixed in isolation. The need for social security is complex and comes from a mix of social and economic factors – so the solution needs to reflect this.”

Jurors in Wales identified support for single parents as a priority, as childcare responsibilities limit their availability to work.

“People who have never had to turn down work because their wages won’t cover childcare don’t know how important it is that parents get a fair chance to better their circumstances.”

“Single parents do need extra help because they have even less time and flexibility, you can’t expect them to be in two places at once.”

Beyond providing cash to families, the Welsh government can do much more to support people who are not having all of their needs met by the UK benefit system. In particular, it should do more to offset the additional costs of raising children in order to help parents work, and to reduce the cost of sending children to school.

As an immediate next step, the Welsh government should expand eligibility for FSM to all families receiving UC (or equivalent benefits) which would make 145,000 children in Wales newly eligible and cost of £60 million a year. It should provide all learners in the foundation phase with a free school meal, as is already the case in England and Scotland, providing an 80,000 additional infant children with a cooked meal each day, at a cost £30 million a year.

It should also permanently extend FSM entitlements to families with no recourse to public funds, which could benefit an estimated 5,900 children in Wales and cost £2.6 million a year.

In the longer term, the Welsh government should invest in universal provision of FSM for all pupils, which would cost £130 million per year.[29]

Wales should also consider how it can reduce costs for families and support more parents into work, by offering free childcare to all lower income families regardless of the levels of deprivation in their area this would bring provision in Wales in line with rest of the UK.

It should also review the timings of the school day and year so parents have access to wraparound care and education once their children are school aged.

August 2021

[1] Department for Work and Pensions, Households below average income: for financial years ending 1995 to 2020, March 2021

[2] Office for National Statistics, Employee earnings in the UK: 2020, 3 November 2020

[3] Office for National Statistics, Labour market overview, UK: July 2021, 15 July 2021

[4] See note 1

[5] Child Poverty Action Group, Wales: Over Half of Children in Poverty Missing Out on Free School Meals, October 2020

[6] CPAG’s calculations from Policy Measures Database, Office for Budget Responsibility, December 2019

[7] EHRC (2018) The cumulative impact of tax and welfare reforms. Country-specific appendix: Wales

[8] Reed, H. and Portes, J. (2018) The cumulative impact of tax and welfare reforms

[9] Department for Work and Pensions, Child Tax Credit and Universal Credit claimants: statistics related to the policy to provide support for a maximum of 2 children, April 2021, July 2021

[10] Department for Work and Pensions, Benefit cap: number of households capped to February 2021, June 2021

[11] Department for Work and Pensions, Households on Universal Credit, data is for February 2021 accessed via Stat-Xplore in July 2021

[12] See note 11

[13] Department for Work and Pensions, People on Universal Credit, data is for May 2021 accessed via Stat-Xplore in July 2021

[14] For more information see: CPAG, Universal Credit: What needs to change to make it fit for children and families? July 2021

[15] 36 per cent of families with children in the bottom fifth of the income distribution reported spending more during the pandemic compared to 22 per cent of families with children in the top fifth. See: Resolution Foundation, Pandemic Pressures: Why families on a low income are spending more during Covid-19, January 2021

[16] 58,000 families with children were claiming universal credit in February 2020 compared to 91,000 in February 2021. Source: see note 11.

[17] Note this figure does not include learners receiving FSM due to transitional protection rules.

[18] Statistics for Wales Schools’ Census Results April 2021 (provisional)

[19] HM Revenue & Customs, Coronavirus Job Retention Scheme statistics: 29 July 2021, July 2021

[20] House of Commons Library, Constituency data: Universal Credit rollout, July 2021

[21] Resolution Foundation, The Living Standards Outlook 2021, January 2021

[22] CPAG, The Cost of Learning in Lockdown: March 2021 Update, March 2021

[23] CPAG, Cash in a Crisis, June 2021

[24] CPAG and partners, Strengthening Local Welfare Support During the Covid-19 Outbreak, 2020

[25] Welsh Government Covid-19 Wales Interactive Dashboard [accessed 2nd August 2021]

[26] With funding from Standard Life, CPAG is undertaking a project exploring how local welfare assistance schemes can be reformed to end the need for foodbanks.

[27] See note 1

[28] See note 14

[29] See note 5